COMMENTS ON BRITISH AMERICAN TOBACCO (BAT) (MALAYSIA) BERHAD (4162)

FIGURE 1: BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD LAST 5 YEARS SHARE PRICE TREND

**analysis based on 2017 annual report.

1.       GENERAL INTRO: This counter core business is marketing and sales of BAT brands of cigarettes.

2.       NOTABLE POINTS:

a.       industry adversely affected by illicit cigarette trade, which amount to ~58.3% of total cigarette sales in Malaysia

b.      main brands include Dunhill, Pall Mall and Kent, total BAT market share in Malaysia is 53.9%

c.       dividend policy: paying at least 90% of net profits in dividend

d.      in 2017 reported closure of manufacturing plant at Petaling Jaya, this inturn reduced exporting volume and overall revenue of the financial year. In second half of 2017, switch to full importation model, which reduces cost of sales by ~10%.

e.      to better meet the needs of customers for Value for Money segment, in 2017 introduced the Rothman brand, providing a legally lower priced alternative for consumers.

3.       IS THIS COUNTER A STRONG GROWTH STOCK? 

a.       REVENUE RANGE (million): ~3002.2 million in 2017 annual report, this is a high revenue company.

b.      SHARE PRICE: last few years share price on decreasing trend, dropped from ~RM70 in 2014 to current share price of ~RM36.

c.       EARNING PER SHARE (EPS): earning per share in last 5 years were overall decreasing, EPS were 288.3, 315.8, 318.3, 252.6, 172.6 sen per share, respectively.

d.      FUTURE POTENTIAL/PROSPECTS: with the absence of strong national enforcement in place, illegal cigarette trade will continue to affect company revenue and profit in the future

e.      CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets is 23.8 million, around 2.3% of total assets.

4.       IS THIS A STRONG DIVIDEND STOCK?     

a.       DIVIDEND YIELD: in 2017 report, dividend payout declared was 169 sen per share, amounts to 4.69% based on current share price.
b.      CONSISTENCY: dividend payout declared in last five years is on overall decreasing trend, the declared dividends were 282, 309, 312, 278, 169 sen per share, respectively.

5.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around 11.6 million

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is strongly supported by institutional investors, there is presence of 22 institutional investors at top 30 major shareholders list, including EPF and a number investment funds and insurance companies.

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